MORE REVENUE. MORE PROFIT.
Pricing is not confined to the Finance function. It is a cross-functional process that requires collaboration from a myriad of stakeholders, including Attorneys, Billing, Business Development, Collections, Intake, Marketing, Practice Management, Technology.
Price is often the final piece of your business development effort: the deal closes only after the buyer has agreed to the price. Price negotiation is critical, as is the process that determines the firm's rates and fee agreements.
Pricing belongs to Marketing: it is one of the four Ps of the Marketing Mix. Its roots are financial, but its purpose is to help communicate value and market position to buyers and to capture profit.
Pricing drives firm revenue, unlike other marketing options. Pricing improves firm profits, unlike other profitability levers. Without a Pricing Strategy, your firm diminishes its Pricing Power.
PATRICK ON PRICING
Driving Revenue: Value, Value Propositions and Value-Based Pricing
(ALA Legal Management, March 2013)
Alan Weiss said it best: “Every buyer wants to lower fees, but not one wants to lower value.” Not only does this truism encapsulate the challenge of serving clients, it reveals a law firm’s true business objective: offering value. In a capitalist economy, every consumer – whether conscious or not – asks the question: “Is this purchase worth the cost?” In other words, is the value of the purchase equal to (or greater than) the price paid? Every transaction is based on this type of cost/benefit analysis.
Prospective clients have four cost/benefit options when selecting counsel: choose you, choose a competitor, do the work in-house or do nothing. Why choose your firm? A singular – but not simple – reason: value. Because the essence of your client relationships – acquisition and retention – is rooted in the concept of value, it is imperative that you and your firm be proactive and deliberate in defining your firm’s value.
Value Reimagined: The Value Bike™
(Pricing on the Front Line, ABA Publishing, January 2017)
There exists no simple definition of value upon which professionals can agree. Much like the Supreme Court's definition of pornography, it is hard to define but easy to identify. Clients certainly know if they are getting value out of their professional service providers, een if they are unable to articulate how they measure value. McKinsey & Company offers a useful description that seems to capture clients' expectations: "The real essence of value revolves around the tradeoff between the benefits a customer receives from a product and the price he or she pays for it." In this explanation, value has two key components: benefits and costs. Clients seek benefits, with an understanding that the tradeoff for the benefits is the associated costs, often expressed as a price.
